The rally in Coca-Cola’s stock (KO) is just beginning, said one closely watched beverage analyst on Wall Street.
“We see the company exiting FY21 transition year stronger for four reasons: 1) strong emerging markets despite still low vaccination rate, 2) on-premise recovering faster than originally forecasted, 3) restructuring and portfolio rationalization led to a more focused and agile organization, and 4) gross margin benefiting from incidence model. In addition, the valuation is compelling in light of improved fundamentals with a good line of sight for EPS to grow a 12% CAGR through FY23 reaching $2.71 that year, ex. potential divestiture of bottling assets,” said Guggenheim’s Laurent Grandet.
Coke’s shares rose 1% to $59.86 in pre-market trading Tuesday.
The analyst’s call comes as Coke has surprisingly been a top-performing stock these past three months.
We say surprising as the company — along with rivals in the packaged foods space — continue to battle high levels of inflation that is weighing on profit margin potential. And for Coke specifically, 40% of its U.S. sales are on-premise and 30% is on-premise overseas (or tied to going out at restaurants, sporting events, etc.) — not a stellar place to be amid the ongoing, unpredictable pandemic.
Shares of Coke have rallied to the tune of 12% in the past three-months, according to Yahoo Finance Plus data. The S&P 500 has returned 9.4% during that same stretch.
